In 2009, Indiana University political science professor Elinor Ostrom became the first woman to win the prize. She received it "for her analysis of economic governance, especially the commons." Ostrom's research showed how groups work together to manage common resources such as water supplies, fish and lobster stocks, and pastures through collective property rights. She showed that ecologist Garrett Hardin's prevailing theory of the "tragedy of the commons" is not the only possible outcome, or even the most likely outcome, when people share a common resource.

Hardin's theory says that common resources should be owned by the government or divided into privately owned lots to prevent the resources from becoming depleted through overuse. He said that each individual user will try to obtain maximum personal benefit from the resource to the detriment of later users. Ostrom showed that common pool resources can be effectively managed collectively, without government or private control, as long as those using the resource are physically close to it and have a relationship with each other. Because outsiders and government agencies don't understand local conditions or norms, and lack relationships with the community, they may manage common resources poorly. By contrast, insiders who are given a say in resource management will self-police to ensure that all participants follow the community's rules.

Learn more about Ostrom's prize-winning research in her 1990 book, "Governing the Commons: The Evolution of Institutions for Collective Action," and in her 1999 Science Journal article, "Revisiting the Commons: Local Lessons, Global Challenges."

The 2002 prize went to psychologist Daniel Kahneman, "for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty." Kahneman showed that people do not always act out of rational self-interest, as the economic theory of expected utility maximization would predict. This is a crucial concept to the field of study known as behavioral finance. Kahneman conducted his research with Amos Tversky, but Tversky was not eligible to receive the prize because he died in 1996 and the prize is not awarded posthumously.

The pair identified common cognitive biases that cause people to use faulty reasoning to make irrational decisions. These biases include the anchoring effect, the planning fallacy and the illusion of control. Kahneman and Tversky's article, "Prospect Theory: An Analysis of Decision under Risk," is one of the most frequently cited in economics journals. Their award-winningprospect theory, shows how people really make decisions in uncertain situations. We tend to use irrational guidelines such as perceived fairness and loss aversion, which are based on emotions, attitudes and memories, not logic. For example, they observed that we will expend more effort to save a few dollars on a small purchase than to save the same amount on a large purchase.

Kahneman and Tversky also showed that people tend to use general rules, such as representativeness, to make judgments that contradict the laws of probability. For example, when given a description of a woman who is concerned about discrimination and asked if she is more likely to be a bank teller or a bank teller who is a feminist activist, people tend to assume she is the latter even though probability laws tell us she is much more likely to be the former.